LTC PROPERTIES INC

Previous wording

Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, interest earned on outstanding loans receivable and income from investments in unconsolidated joint ventures. Our investments in owned properties, financing leases, mortgage loans, mezzanine loans and preferred equity investments represent our primary source of liquidity to fund distributions and are dependent upon the performance of the operators on their lease and loan obligations and the rates earned thereon. To the extent that the operators experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by property type and operator. Our monitoring process includes periodic review of financial statements for each facility, periodic review of operator credit, scheduled property inspections and review of covenant compliance.

Current wording

Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, interest earned on outstanding loans receivable and income from investments in unconsolidated joint ventures. Our investments in owned properties, financing leases, mortgage loans, mezzanine loans and preferred equity investments represent our primary source of liquidity to fund distributions and are dependent upon the performance of the operators on their lease and loan obligations and the rates earned thereon. To the extent that the operators experience

Previous wording

In addition to our monitoring and research efforts, we also structure our investments to help mitigate payment risk. Some operating leases, financing leases and loans are credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the operator and its affiliates.

Current wording

In addition to our monitoring and research efforts, we also structure our investments to help mitigate payment risk. Some operating leases, financing leases and loans are credit enhanced by guaranties, security deposits and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the operator and its affiliates.

Previous wording

We believe our business model has enabled and will continue to enable us to maintain the integrity of our property investments, including in response to financial difficulties that may be experienced by operators. Traditionally, we have taken a conservative approach to managing our business, choosing to maintain liquidity and exercise patience until favorable investment opportunities arise.

Current wording

We believe our business model has enabled and will continue to enable us to maintain the integrity of our property investments, including in response to financial difficulties that may be experienced by operators. We have traditionally taken and will continue to take a conservative approach to managing our business, choosing to maintain liquidity and exercise patience until favorable investment opportunities arise.

Previous wording

As of December 31, 2023, we had $1.7 billion in carrying value of net investments, consisting of $1.0 billion or 56.7% invested in owned and leased properties, $196.0 million or 11.3% invested in properties we own accounted for as

Current wording

As of December 31, 2024, we had $1.7 billion in carrying value of net investments, consisting of $925.8 million or 55.3% invested in owned and leased properties, $357.9 million or 21.4% invested in properties we own accounted for as financing receivables, $312.6 million or 18.7% invested in mortgage loans secured by first mortgages, $47.2 million or 2.8% in notes receivable and $30.6 million or 1.8% in unconsolidated joint ventures.

Previous wording

Rental income, income from financing receivables and interest income from mortgage loans represented 64.6%, 7.7% and 24.2%, respectively, ofTotal revenueson the* Consolidated Statements of Income*for the year ended December 31, 2023. In most instances, our lease structure, which pertains to owned properties and those properties we own accounted for as financing receivables, contains fixed annual rental escalations and/or annual rental escalations that are contingent upon changes in the Consumer Price Index. Certain leases have annual rental escalations that are contingent upon changes in the gross operating revenues of the property. This revenue is not recognized until the appropriate contingencies have been resolved.

Current wording

Rental income, income from financing receivables and interest income from mortgage loans represented 63.0%, 10.3% and 21.5%, respectively, ofTotal revenueson the* Consolidated Statements of Income*for the year ended December 31, 2024. In most instances, our lease structure, which pertains to owned properties and those properties we own accounted for as financing receivables, contains fixed annual rental escalations and/or annual rental escalations that are contingent upon changes in the Consumer Price Index. Certain leases have annual rental escalations that are contingent upon changes in the gross operating revenues of the property. This revenue is not recognized until the appropriate contingencies have been resolved.

Previous wording

For the year ended December 31, 2023, we recognized a $2.1 million straight-line rental adjustment reflecting higher cash rent received than recorded as rental income and $0.8 million in amortization and write-off of lease incentives. For the remaining leases in place at December 31, 2023, assuming no modification or replacement of existing leases and no new leased investments are added to our portfolio, except for the potential subsequent lease extensions and the leases reported below underUpdate on Certain Operators, we currently expect that the non-cash straight-line rent portion of rental income will increase from negative $2.1 million in 2023 to negative $2.5 million for projected annual 2024. The negative non-cash straight-line portion of rental income represents higher cash rent projected to be received than recorded as rental income. Our cash rental income is projected to increase from $130.2 million in 2023 to $131.7 million for projected annual 2024. At December 31, 2023, the straight-line rent receivable balance on the consolidated balance sheet was $19.6 million.

Current wording

For the year ended December 31, 2024, we recognized $2.3 million straight-line rental income and $0.8 million in amortization and write-off of lease incentives. For the remaining leases in place at December 31, 2024, assuming no modification or replacement of existing leases and no new leased investments are added to our portfolio, except for the potential subsequent lease extensions and the leases reported below underUpdate on Certain Operators, we currently expect that the non-cash straight-line rent portion of rental income will decrease from $2.3 million in 2024, which includes $3.2 million of one-time additional straight-line rental income related to restoring accrual basis accounting for two master leases, to a negative $2.9 million for projected annual 2025 representing an adjustment from higher cash rental income to lower GAAP rental income. Our cash rental income is projected to decrease from $131.1 million in 2024 to $130.7 million for projected annual 2025 due to properties sold. In place cash rents are expected to increase by 3.2%. At December 31, 2024, the straight-line rent receivable balance on the consolidated balance sheet was $21.5 million.

Previous wording

Lease Renewals and Extensions

Current wording

Lease Renewals and Extensions during 2024:

Previous wording

During the third quarter of 2022, a portfolio of 12 assisted living communities was temporarily transitioned to an existing operator under a two-year master lease. The temporary transition allowed us to find a more permanent solution for the portfolio as follows:

Current wording

During the third quarter of 2022, a portfolio of 12 assisted living communities was temporarily transitioned to ALG Senior Living (“ALG”) under a two-year master lease. The temporary transition allowed us to find a more permanent solution for the portfolio as follows*(dollar amounts in thousands)*:

Previous wording

Prestige Healthcare (“Prestige”) operates 22 skilled nursing centers located in Michigan secured under four mortgage loans and two skilled nursing centers located in South Carolina under a master lease. Prestige is our largest operator based upon revenues and assets representing 16.6% of our total revenues and 14.3% of our total assets as of December 31, 2023. During the second quarter of 2023, we agreed to defer up to $1.5 million, or up to $0.3 million per month for May through September 2023, in interest payments due on one of Prestige’s mortgage loans secured by 15 skilled nursing centers in Michigan. We deferred $0.6 million and $0.9 million in interest payments during the second and third quarter of 2023, respectively.

Current wording

Prestige Healthcare (“Prestige”) operates 21 skilled nursing centers located in Michigan secured under four mortgage loans and two skilled nursing centers located in South Carolina under a master lease. Prestige is our largest operator based upon revenues and assets representing 15.6% of our total revenues and 14.6% of our total assets as of December 31, 2024.

Previous wording

During the fourth quarter of 2023, we amended the mortgage loan with Prestige which was subject to the previously agreed upon interest deferral. Effective January 1, 2024, the minimum mortgage interest payment due to us is based on an annual current pay rate of 8.5% on the outstanding loan balance of $183.3 million. The current contractual interest rate on the loan of 10.8% remains unchanged. The amendment also provides us the right to draw on Prestige’s security to pay the difference between the contractual rate and current pay rate. We received all 2023 contractual interest of $19.5 million due from Prestige after applying $3.4 million of its security. Full contractual interest has been paid on the loan through February 2024 and we expect to receive full contractual cash interest through 2025. Subsequent to December 31, 2023, Prestige increased the security from its receipt of retro-active Medicaid funds. Accordingly, we currently hold security of $4.0 million. Additional retro-active Medicaid payments received by Prestige in 2024 will be remitted to us as security.

Current wording

During the fourth quarter of 2023, we amended the mortgage loan with Prestige which was subject to the previously agreed upon interest deferral. Effective January 1, 2024, the minimum mortgage interest payment due to us is based on an annual current pay rate of 8.5% on the outstanding loan balance. The contractual interest rate on the loan, at the time of the amendment of 10.8% remained unchanged. The amendment also provides us the right to draw on Prestige’s security to pay the difference between the contractual rate and current pay rate.

Previous wording

The following tables summarizes our transactions in 2023*(dollar amounts in thousand):*

Current wording

The following tables summarize our transactions in 2024*(dollar amounts in thousand):*

Previous wording

portion of our real estate investments that are real property or mortgage loans. Investment mix measures the portion of our investments that relate to our various property types. Operator mix measures the portion of our real estate investments that relate to our top five operators. Geographic mix measures the portion of our real estate investment that relate to our top five states.

Current wording

Concentration Risk. We evaluate by gross real estate investment our concentration risk in terms of asset mix, real estate investment mix, operator mix and geographic mix. Concentration risk is valuable to understand what portion of our real estate investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our real estate investments that are real property or mortgage loans. Investment mix measures the portion of our investments that relate to our various property types. Operator mix measures the portion of our real estate investments that relate to our top five operators. Geographic mix measures the portion of our real estate investment that relate to our top five states.

Previous wording

Management regularly monitors the economic and other factors listed above. We develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends.

Current wording

Management regularly monitors the economic and other factors listed above. We develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic, health care and company-specific trends.

Previous wording

We assess the collectability of substantially all our lease payments through maturity. If collectability is not probable, all or a portion of our straight-line rent receivables and other lease receivables may be written-off. In order to assess our lease payments for collectability, we make assumptions that include evaluating lessee’s payment history, the financial strength of the lessee, future market conditions and contractual rents, and timing of expected payments. Our ability to accurately predict collectability of substantially all of our lease payments impacts the timing of straight-line rent and other lease receivable write-offs, if any. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our consolidated financial statements.

Current wording

We assess the collectability of substantially all our lease, financing receivables and mortgage loan payments through maturity. If collectability is not probable, all or a portion of our straight-line rent receivable, effective interest receivable and other lease receivables may be written-off. In order to assess our payments for collectability, we make assumptions that include evaluating operator’s payment history, the financial strength of the operator, projected future market conditions and contractual amounts and timing of expected payments. Our ability to accurately predict collectability of substantially all of the payments due to us impacts the timing of straight-line rent, effective interest and other lease receivable write-offs, if any. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our consolidated financial statements.

Previous wording

We believe that our current cash balance, cash flow from operations available for distribution or reinvestment, our borrowing capacity and our potential ability to access the capital markets are sufficient to provide for payment of our current operating costs, meet debt obligations and pay common dividends at least sufficient to maintain our REIT status and repay borrowings at, or prior to, their maturity. The timing, source and amount of cash flows used by financing and investing activities are sensitive to the capital markets’ environment, especially to changes in interest rates. In addition, the slow recovery from the effects of the COVID-19 pandemic and inflationary pressure have adversely affected and are expected to continue to adversely affect our operators’ business, results of operations, cash flows and financial condition which could, in turn, adversely affect our financial position.

Current wording

We believe that our current cash balance, cash flow from operations available for distribution or reinvestment, our borrowing capacity and our potential ability to access the capital markets are sufficient to provide for payment of our current operating costs, meet debt obligations and pay common dividends at least sufficient to maintain our REIT status and repay borrowings at, or prior to, their maturity. The timing, source and amount of cash flows used by financing and investing activities are sensitive to the capital markets’ environment, especially to changes in interest rates. In addition,

Previous wording

hire and maintain qualified staff, ability to control rising operating costs, and the potential for significant reforms in the health care industry, and the ongoing impact of COVID-19 and related occupancy challenges faced by our industry. In addition, our future growth in net income and cash flow may be adversely impacted by various proposals for changes in the governmental regulations and financing of the health care industry or the impact of any other infectious disease and epidemic outbreaks. We cannot presently predict what impact these potential events may have, if any. We believe that adequate provision has been made for the possibility of loans proving uncollectable but we will continually evaluate the financial status of the operations of the seniors housing and health care properties. In addition, we will monitor our borrowers and the underlying collateral for mortgage loans and will make future revisions to the provision, if considered necessary.

Current wording

The operating results of the properties will be impacted by various factors over which the operators may have no control. Those factors include, without limitation, the health of the economy, inflation pressures, employee availability and cost, changes in supply of or demand for competing seniors housing and health care facilities, ability to hire and maintain qualified staff, ability to control other rising operating costs, the potential for significant reforms in the health care industry, and related occupancy challenges faced by our industry. In addition, our future growth in net income and cash flow may be adversely impacted by various proposals for changes in the governmental regulations and financing of the health care industry or the impact of any other infectious disease and epidemic outbreaks. We cannot presently predict what impact these potential events may have, if any. We believe that adequate provisions have been made for the possibility of loans and financing receivables proving uncollectible but we will continually evaluate the financial status of the operations of our seniors housing and health care properties. In addition, we will monitor our borrowers and the underlying collateral for mortgage loans and financing receivables and will make future revisions to the provision, if considered necessary.

Previous wording

*Unsecured Credit Facility.We have an unsecured credit agreement (the “Credit Agreement”) that provides for an *aggregate commitment of the lenders of up to $500.0 million comprising of a $400.0 million revolving credit facility (the “Revolving Line of Credit”) and two $50.0 million term loans (the “Term Loans”). The Credit Agreement permits us to request increases to the Revolving Line of Credit and Term Loans commitments up to a total of $1.0 billion. The Term Loans mature on November 19, 2025 and November 19, 2026. The Revolving Line of Credit had a maturity date of November 19, 2025 and provided a one-year extension option at our discretion, subject to customary conditions. During the fourth quarter of 2022, we entered into the First Amendment to Third Amended and Restated Credit Agreement to replace LIBOR with SOFR, plus a credit spread adjustment of 10 basis points (“Adjusted SOFR”), as the reference rate for purpose of calculating interest under the agreement. Other material terms of the Credit Agreement remained unchanged. Further, subsequent to December 31, 2023, we entered into a Second Amendment to Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) to accelerate the one-year extension option notice to January 4, 2024. Concurrently, we exercised our option to extend the maturity date of the Credit Agreement, as amended to November 19, 2026.

Current wording

*Unsecured Credit Facility.Through the first quarter of 2024, we had an unsecured credit agreement (the “Original Credit Agreement”) that provided for an *aggregate commitment of the lenders of up to $500.0 million comprising of a $400.0 million revolving credit facility (the “Revolving Line of Credit”) and two $50.0 million term loans (the “Term Loans”). The Term Loans mature on November 19, 2025 and November 19, 2026. The Revolving Line of Credit had a maturity date of November 19, 2025 and provided a one-year extension option at our discretion, subject to customary conditions. During the first quarter of 2024, we entered into an amendment to the Original Credit Agreement (the “Amended Credit Agreement”) to accelerate our one-year extension option notice to January 4, 2024. Concurrently, we exercised our option to extend the maturity date of the initial Term Loans and the Revolving Line of Credit to November 19, 2026. Other material terms of the Original Credit Agreement remained unchanged. The Amended Credit Agreement permits us to request increases to the Revolving Line of Credit and Term Loans

Previous wording

Based on our leverage at December 31, 2023, the Revolving Line of Credit provides for interest annually at Adjusted SOFR plus 115 points and a facility fee of 20 basis point and the Term Loans provide for interest annually at Adjusted SOFR plus 135 points.

Current wording

Based on our leverage at December 31, 2024, the Revolving Line of Credit provides for interest annually at Adjusted SOFR plus 110 points and a facility fee of 15 basis points and the Term Loans provide for interest annually at Adjusted SOFR plus 125 points.

Previous wording

Interest Rate Swap Agreement. In connection with entering into the Term Loans as discussed above, we entered into two receive variable/pay fixed interest rate swap agreements (“Interest Rate Swaps”) with maturities of November 19, 2025 and November 19, 2026, respectively, that will effectively lock-in the forecasted interest payments on the Term Loan borrowings over the four and five year terms of the loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on ourConsolidated Balance Sheets at fair value, with changes in the fair value of these instruments recognized inAccumulated other comprehensive income (loss) on our Consolidated Balance Sheets. In connection with entering into the First Amendment to Third Amended and Restated Credit Agreement discussed above, we entered into amendments to our Interest Rate Swaps to account for SOFR as the updated reference rate in the First Amendment to Third Amended and Restated Credit Agreement. During 2023, we recorded a $2.6 million decrease in fair value of Interest Rate Swaps.

Current wording

Interest Rate Swap Agreement. In connection with entering into the Term Loans as discussed above, we entered into two receive variable/pay fixed interest rate swap agreements (“Interest Rate Swaps”) with maturities of November 19, 2025 and November 19, 2026, respectively, that will effectively lock-in the forecasted interest payments on the Term Loan borrowings over the four and five year terms of the loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on ourConsolidated Balance Sheets at fair value, with changes in the fair value of these instruments recognized inAccumulated other comprehensive income (loss) on our Consolidated Balance Sheets. During 2024, we recorded a $2.3 million decrease in fair value of Interest Rate Swaps.

Previous wording

*Senior Unsecured Notes.*We have senior unsecured notes held by institutional investors with interest rates ranging from 3.66% to 5.03%. The senior unsecured notes mature between 2024 and 2033.

Current wording

*Senior Unsecured Notes.*We have senior unsecured notes held by institutional investors with interest rates ranging from 3.66% to 4.5%. The senior unsecured notes mature between 2026 and 2033.

Previous wording

At December 31, 2023, we had 43,021,593 shares of common stock outstanding, equity on our balance sheet totaled $916.3 million and our equity securities had a market value of $1.4 billion. During the year ended December 31, 2023, we declared and paid $94.8 million of cash dividends.

Current wording

At December 31, 2024, we had 45,510,754 shares of common stock outstanding, equity on our balance sheet totaled $1.1 billion and our equity securities had a market value of $1.6 billion. During the year ended December 31, 2024, we declared and paid $100.5 million cash dividends.

Previous wording

*Common Stock.*We have separate equity distribution agreements (collectively, “Equity Distribution Agreements”) to offer and sell, from time to time, up to $200.0 million in aggregate offering price of our common shares. The Equity Distribution Agreements provide for sales of common shares to be made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings. During the year ended December 31, 2023, we sold 1,658,400 shares of common stock for $53.7 million in net proceeds under our Equity Distribution Agreements. In conjunction with the sale of common stock, we incurred $0.8 million costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received. At December 31, 2023, we had $76.0 million available under our equity distribution agreement. Subsequent to December 31, 2023, we sold 91,100 shares of common stock for $2.9 million in net proceeds under our Equity Distribution Agreements. Accordingly, we have $73.1 million available under our Equity Distribution Agreements.

Current wording

During the fourth quarter of 2024, we terminated our Original Equity Distribution Agreements and entered into a new equity distribution agreement (the “New Equity Distribution Agreement”) to sell, from time to time, up to $400.0 million in aggregate offering price of shares of our common stock. The New Equity Distribution Agreement provides for sales of common shares to be made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings. During the fourth quarter of 2024, we sold 250,000 shares of our common stock for $9.5 million in net proceeds under the New Equity Distribution Agreement. Accordingly, we have $390.3 million available under the New Equity Distribution Agreement. In conjunction with the sale of common stock, we incurred $0.3 million of costs associated with the New Equity Distribution Agreement which have been

Previous wording

During 2023, we acquired 43,933 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. Subsequent to December 31, 2023, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February and March 2024, payable on January 31, February 29 and March 29, 2024, respectively, to stockholders of record on January 23, February 21, and March 21, 2024, respectively.

Current wording

During 2024, we acquired 49,540 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. Subsequent to December 31, 2024, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February and March 2025, payable on January 31, February 28 and March 31, 2025, respectively, to stockholders of record on January 23, February 20, and March 21, 2025, respectively.

Previous wording

Restricted Stock and Performance-based Stock Units. During 2023, we granted 232,887 shares of restricted common stock and performance-based stock units under the 2021 Plan as follows:

Current wording

Restricted Stock and Performance-based Stock Units. During 2024, we granted 307,955 shares of restricted common stock and performance-based stock units under the 2021 Plan as follows:

Previous wording

Stock Options. We did not issue any stock options during the year ended December 31, 2023. At December 31, 2023, we have 5,000 stock options outstanding and exercisable.

Current wording

Stock Options. We did not issue any stock options during the year ended December 31, 2024. At December 31, 2024, we had no stock options outstanding and exercisable.